For Q1FY08, the consolidated income of Punj Lloyd stood at Rs 1,394 crore, a rise of 73%, while its PAT before minority interest was at Rs 59 crore. On back of rising OPM, international presence, significant experience and strong order book, a buy rating is recommended with a price target of Rs 420.
Company Discription:
Punj Lloyd incorporated in 1998 is one of the largest engineering companies in India providing integrated construction and project management services to energy industry and infrastructure projects. The company has its marketing operations spread across 12 locations in and outside India. The company has acquired Sembcorp Engineers & Construction; a Singapore based company and has entered into JV with Royal Highness Prince of Saudi Arabia.
Shareholding Pattern:
| As on 30th June 2007 | Holding (%) | No of shares (in lakhs) |
| Promoter | 25.7 | 134.2 |
| Foreign Promoter | 29.1 | 152 |
| FII and MF | 21.2 | 110.7 |
| Public and others | 24 | 125.3 |
Recent Developments:
PLL has recently bagged a contract from Qatar Petroleum to construct a multi-product pipeline for Rs 389 crore. In recent past, company received an Rs 590 crore order for building a 6-mmtpa-sulphur block at Bina Refinery to be completed in 25 months. In addition, PLL has forayed into real estate business through a JV with Ramprastha Group. This JV commenced its business, developing a 2.5mn sq ft integrated township in Ghaziabad. The company has also acquired 25.1% stake in Pipavav Shipyard, which will support in the offshore sector as well as mark its foray into the rapidly growing ship building business.
Robust growth plans and strong order book:
With tight demand supply scenario for construction equipment on hire, the company has earmarked a capex plan of Rs 400-500 crore annually for the next three years. Strong investment is expected in ethanol capacity in Europe and US. Simon Carves, a subsidiary of PLL has the technology and EPC capability to cater this particular sector and make inroads cashing on this opportunity. PLL, on consolidated basis has an order book of Rs 16,480 crore. Of which, PLL (excluding SEC) contributed Rs 11,576 crore and SEC contributed Rs 4,904 crore. PLL has bagged approximately Rs 11,000 crore order in last 9 months.
Margins of SEC to improve:
We expect the margins of SEC to gradually improve to 7.2% from current 1.3-1.5% as the company including Simon Craves has bagged quality as well as high margin orders in spaces such as ethanol, petroleum, etc. on standalone basis, the company is expected to improve its OPM to around 11.3% from the current levels of 10.9%.
| Rs (Cr) | FY06 | FY07 | FY08E | FY09E |
| Revenues | 1,684 | 5,126 | 8,562 | 11,662 |
| YoY growth (%) | -9 | 204.4 | 67 | 36.2 |
| Operating Profit | 174 | 374 | 967 | 1,341 |
| OPM (%) | 10.3 | 7.3 | 11.3 | 11.5 |
| PAT | 37.6 | 161.2 | 309.1 | 513 |
| YoY growth (%) | -44.9 | 328.7 | 91.7 | 65.7 |
| EPS (Rs) | 10.3 | 7.4 | 13.5 | 16 |
| P/E (x) | 34.3 | 48 | 26.3 | 21.9 |
| EV/EBITDA (x) | 31.3 | 11.7 | 10.9 | 8 |
| ROE (x) | 4.7 | 13.5 | 21.7 | 27.1 |
| ROCE (x) | 10.1 | 14.9 | 19 | 23 |
Risk Diversification:
PLL is geographically well diversified with its presence all over the globe that reduces the risk of slowdown in a particular geography. In addition, the company has fully diversified portfolio, which includes pipelines, tanks, infrastructure and subsidiaries contribution. PLL takes high number of low gestation period projects, which leads to a faster turnover.
Valuation and Recommendation:
For Q1FY08, the consolidated income stood at Rs 1,394 crore, a rise of 73%, while its PAT before minority interest was at Rs 59 crore. The contribution of SEC in the topline and bottomline was Rs 688 crore and Rs 38 crore. On back of rising OPM, international presence, significant experience and strong order book, we recommend a buy rating with a price target of Rs 420.
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